Air Nam needs N$3bn

Air Namibia needs between N$2.5 and N$3 billion to become sustainable, as unfavourable aircraft leases and non-lucrative routes take their toll on the national carrier.

Since the airline's inception in 1998 it has received just shy of N$6 billion in government bailouts by 2014.

The net loss during this period was N$5.3 billion.

Air Namibia says this could have been prevented if government funding for the payment of operational leases had rather been spent on buying aircraft.

Of the N$5.9 billion received, a total of N$5.2 billion was spent on operational costs such as leases, and only N$748 million was spent on acquiring aircraft.

In its current strategic plan Air Namibia aims to change this, moving towards aircraft ownership. Even though Air Namibia operates ten aircraft it only owns two and is in the process of acquiring another two.

Appearing before the Parliamentary Standing Committee on Economic and Public Administration yesterday, the airline gave feedback on its challenges, government bailouts and what strategy it has in place to turn this around.

Acting managing director Mandi Samson said the national carrier has been struggling financially. “We have always been the poor child. Our finances are not what they should be.”

Elaborating on the matter, the acting general finance manager, Xavier Masule, said that all African airlines are loss-making and that Air Namibia is working tirelessly to get out of this class.

He said since the incorporation of the company in 1998 it had never held an AGM and the first was held in May this year.

There, audited financial statements for the first 17 years were tabled for adoption and approval by the line minister.

“These will now go to cabinet and parliament, after which they will be made public.”

Masule said financial statements for 2015/16 are to be tabled by the end of this year and for statements for 2017/18 will be completed early next year.

With regard to route profitability for the period from April to July this year, it was only the Ondangwa (16.7%), Durban (3.1%) and Victoria Falls (5.6%) routes that made profit.

There was some improvement from the previous year on the other routes though.

Masule said it is anticipated that by March next year all routes will break even except for Luanda and Frankfurt. These two routes showed losses of -63.2% and -47.1% respectively.





Masule said the Airbus A330 used on the Frankfurt route is responsible for the biggest loss but contributes significantly to tourism. This route is used for Namibian fish exports to Europe.

On each one-way leg of the Windhoek/Frankfurt route Air Namibia makes a loss of N$491 000.

The solution is to remove one aircraft from the route and deploy it on another route that is more viable.

Several possible routes have been identified. These include flying to China via either Luanda or Harare. Another option is a London flight via Accra, Harare, Luanda or Lagos.

Masule added that Air Namibia cannot become financially sustainable because of the funding model it is built on.

“Shareholder investment is weak.”

He pointed out that government subsidies are targeted towards payment of operating expenses such as aircraft rental costs, maintenance and fuel.

“This model has to change. We started with acquiring the ERJ fleet and in 2017 operating leases were converted into ownership. We are left with the two A330s and A319s, which we envisage to also convert.”

This could cost in the range of US$100 million.

Masule said if the government instead provided capital assets such as aircraft acquisition, an aviation training academy, land and hangar construction, cargo warehouse facilities at the Hosea Kutako International Airport, bailouts would not be needed.

He further highlighted the fact that there is inadequate airport infrastructure.

“Eros airport closes at 21:00 and we are restricted to a maximum of three flights per day.”

He said if flight restrictions there were removed and the airport closed at midnight, it would result in lower unit costs, which would enable the airline to introduce lower fares.

Also, Ondangwa's airport, although recently upgraded, cannot handle large aircraft on the taxiway and apron. “We need this given the high demand for seats,” he said.

Air Namibia also wants to build another hangar at Hosea Kutako but there is no land.

Furthermore it was noted that despite a cabinet decision that government and SOEs employees must use Air Namibia for official trips, this is not being done.

“Too much leeway is given to government officials to fly on foreign flights,” Masule said.

He said Air Namibia also wants the government to introduce regulations on new airlines entering the Namibian market.

“We have allowed more and more airlines into the country and the airport cannot handle it. Our airport is at risk of being shut down. Who is killing who? Is it sustainable for the market to have more capacity than it can handle?”

Samson said the airline flies to six domestic and 11 international destinations using a fleet of ten aircraft.



She explained that the number of passengers travelling to and from Namibia stands at 1.4 million; 56% of them from Africa and 28% from Europe. About 10% are domestic passengers, up from 6% in 2015.



“We are pleased with the increase as Namibians were previously not using their own airline,” said Samson.

Air Namibia's contribution to the GDP stands at N$704 million while it supports 4 550 jobs. The productivity boost from the airline during 2015/16 was N$1.4 billion.

Samson said the airline is subject to an independent evaluation every five years to determine its contribution to the economy. The last review was for the 2015/16 financial year.

“All reviews to date show that Air Namibia makes a net positive contribution to the economy.”

This is arrived at by adding the contribution to GDP, taxes and employment created by the airline, less government subsidies paid to the airline.

“The country stands to lose more if Air Namibia is removed from the scene,” said Samson.

Its promotion of Namibia as tourist destination is quantified at N$1 billion per year.

“We understand that the carrier is not in our hands and that we are not the owners, however other countries that allowed their national airlines to die are now trying to revive them.

“Foreign airlines are not interested in selling Namibia. They are just there to make money and they will not promote the country.”

Committee member McHenry Venaani wanted to know how much money Air Namibia still needs.

“You are saying government was wrong that it was leasing instead of acquiring aircraft. Now you must say how much it is that you need. If the strategic plan does not address this, then it is lacking. It is not good enough to say because you fly the flag that you must be maintained,” he said.

“It will be in the region of N$2.5 to N$3 billion for infrastructure and aircraft,” Masule replied.





ELLANIE SMIT